Inflation Adjustment Will Increase Two State Gas Taxes If Bill Passes

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By Terri Jo Neff

The House Committee on Transportation is slated to consider a bill on Wednesday which would require an inflation adjustment for two state fuel taxes, prompting worries about the financial impact on drivers of what is essentially a tax increase.

Arizona Revised Statutes 28-5606A currently calls for an $.18 per gallon “motor fuel tax” on such fuel that is possessed, used, or consumed in the state, while ARS 28-5606B applies a $.18 per gallon “use fuel tax” for fuel used to propel light-class motor vehicles.

HB2436 would amend state law to mandate an annual adjustment to each tax beginning July 1, 2022, to “reflect the average annual change in the Consumer Price Index published by the United States Department of Labor, Bureau of Labor Statistics.”

The annual inflation adjustment would also apply to the current $.26 per gallon use fuel tax for a use-class motor vehicle, defined in state law as a road tractor, truck tractor, truck or passenger carrying vehicle having a declared gross vehicle weight of more than twenty-six thousand pounds or having more than two axles.

HB2436 leaves in place a current $.09 per gallon use fuel tax for vehicles propelled by non-alternative fuels for the transport forest products without adjusting for inflation. That provision of ARS 28-5606 expires in Dec. 2024.

The two state fuel taxes are in addition to optional taxes that each of Arizona’s 15 counties can enact for roadway and transportation needs. State use fuel taxes does not apply to alternative fuels.

The bill introduced by committee chairman Rep. Frank Carroll (R-LD22) and co-sponsored by committee vice-chair Rep. Justin Wilmeth (R-LD15).